Confidence interval estimation tasks and the economics of overconfidence

David Cesarini, Örjan Sandewall, Magnus Johannesson

    Research output: Contribution to journalArticlepeer-review

    Abstract

    We investigate the robustness of results from confidence interval estimation tasks with respect to a number of manipulations: frequency assessments, peer frequency assessments, iteration, and monetary incentives. Our results suggest that a large share of the overconfidence in interval estimation tasks is an artifact of the response format. Using frequencies and monetary incentives reduces the measured overconfidence in the confidence interval method by about 65 percent. The results are consistent with the notion that subjects have a deep aversion to setting broad confidence intervals, a reluctance that we attribute to a socially rational trade-off between informativeness and accuracy.

    Original languageEnglish (US)
    Pages (from-to)453-470
    Number of pages18
    JournalJournal of Economic Behavior and Organization
    Volume61
    Issue number3
    DOIs
    StatePublished - Nov 2006

    Keywords

    • Experiments
    • Monetary incentives
    • Overconfidence
    • Uncertainty

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Organizational Behavior and Human Resource Management

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